Less than the Least

The New Financial Reforms--Skeel

With the Senate vote today, it’s all over but the signing.

Readers have been kind enough to compliment me on a couple of recent predictions, so it’s only fair that I fess up to one I got very wrong. I said on more than one occasion that the politics of financial reform seemed different, and far less partisan, than with healthcare. In the end, they weren’t. As with healthcare, Republican objections did shape parts of the bill (the resolution regime was tweaked, for instance, and the $50 billion bailout fund was removed), but it’s Democratic legislation rather than a bi-partisan effort.

One of the most interesting decisions for President Obama is who to nominate to head up the new Bureau of Consumer Financial Protection (as the consumer regulator is now called). The obvious choice is Elizabeth Warren, who conceived the consumer regulator idea in the first place and has emerged as the nation’s most famous and effective consumer advocate. But Warren has had run-in’s in the past with several key members of the administration—she called Joe Biden out in an op-ed in the New York Times during the debates over the 2005 bankruptcy amendments, and she sharply criticized Hillary Clinton in her book The Two Income Trap. Warren also is controversial in Washington, with big fans but also big critics.

At another time, the controversy might persuade President Obama to go with someone else. But with foreclosure rates continuing to climb, I think Warren is the one. The administration still is widely viewed as having done too little to address the financial woes of ordinary Americans, and advocating their interests is precisely what Warren is famous for. The other possible choices don’t bring nearly as much to the table in this respect. Assistant Treasury Secretary Michael Barr is quite impressive, for instance, but he’s been closely associated with Tim Geithner (who’s rightly seen as close to Wall Street) throughout the crisis and reform campaign.

As for the legislation as a whole, I do think it has a number of good provisions in it. (I think the derivatives regulation has a lot to commend it, for instance). But the overall thrust is to create a European style partnership between the government and the largest financial institutions, as I’ve complained about before. I’m writing a book on the reforms on a breakneck schedule—to be finished by the end of August and published this fall—so I’ll no doubt have lots more reactions in the weeks to come.

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We are both law professors and evangelical Protestants – a weird
combination in our time. We hope it’s also an interesting combination.
We plan to write about the things that interest us, professionally and
personally: crime and criminal justice (Stuntz), corporate governance,
credit, and bankruptcy (Skeel), the culture wars, politics, literature
and the arts, and other topics.